LONDON, United Kingdom — While the luxury industry entered 2012 with an overall outlook that remain uncertain, the sector remained resilient.

Big news

The Savigny Luxury Index (SLI) lost 2.6 percent in December, whilst the general market index MSCI gained 3 percent over the period. The cause for this divergence was a temporary sell-off in luxury stocks in mid-December. Two factors contributed to this: the Italian sovereign debt crisis prompting an exodus from Italy-based stocks and the finalisation of Hermès’ defensive structure, which sent its share price down 7 percent in the days following the announcement.

Despite treacherous capital market conditions, Michael Kors’ listing in New York on 15th December was a resounding success. Kors sold more shares than expected, achieving a valuation of close to $4 billion, or 3.8x LTM sales. Shares jumped 25 percent on their debut and have since climbed a further 8 percent.

In contrast, the listing of Chinese jeweller Chow Tai Fook in Hong Kong on 9th December was received with lukewarm interest, which may be attributable to high valuation expectations.

A Swiss court ruled that Swatch Group can cut down deliveries of watch parts to third parties from next year. This will create supply issues for a number of watch brands and has already prompted luxury groups such as PPR and LVMH to snap up small watch component manufacturers.

LVMH announced it had increased its stake in Hermès from 21.4 percent to 22.3 percent, flying in the face of its shored-up defences. This caused the besieged group’s share price, having temporarily eased, to resume its upward course, gaining nearly 15 percent in the three weeks since its recent low

Going up

Both Hermès and Swatch share prices gaining around 3 percent over the last four weeks as a result of the events mentioned above.

Going down

Ferragamo continues its downward slide, losing another 12 percent, and now a tad under the sector average, in contrast with its lofty IPO valuation.

What to watch

The luxury sector has proven resilient to date despite the difficult economic environment, but investors are looking at the year ahead with caution. Sector growth continues to be highly dependent on the Chinese customer at home and abroad. Insight into the growing importance of the Chinese tourist versus lacklustre traditional developed markets will be key in shaping our outlook for 2012.

Sector Valuation

Pierre Mallevays is a contributing editor at The Business of Fashion and founder and managing partner of Savigny Partners, a corporate advisory firm focusing on the retail and luxury goods industry.